Large investors rely on cash because of fear of stagflation

Frankfurt Cash is king again among professional investors: The fear of stagflation, i.e. a combination of high inflation and economic stagnation, as a result of tighter monetary policy is driving large investors out of stocks and bonds and into liquidity. With 6.1 percent of their portfolios, international fund managers hold more liquid assets than they did 20 years ago. In April it was still 5.5 percent.

For the first time since 2020, they are underweight equities compared to their stock market benchmark indices. Investors are particularly pessimistic about technology stocks, which weigh them as weakly as they did 16 years ago. That’s according to Bank of America’s (BofA) key monthly survey of 288 international fund managers surveyed between May 6 and 12.